Ruapehu Alpine Lifts Limited has been placed into liquidation. Founded in 1953, the company had 150+ employees (700+ in winter), 200+ trade suppliers, 2,000+ shareholders, 14,000+ life pass holders, and hundreds of thousands of customers. Loved by many. Hated by some. Ignored by none. Did not go gently into the night. May yet ride again.
Liquidation means Liquidation
As anticipated by the press, after the watershed meeting the company was liquidated on Tuesday at 11.00am in the High Court at Auckland. Much has been made of the difference a day makes. However, the rules of liquidation are a statutory process and liquidation on 20 June is the same as liquidation on 21 June (other than some minor issues to do with reporting and timelines). The fact that liquidation means liquidation is important because it tells us how important it is that we are now three days later and the pre-packaged transactions have still not completed. This is not because of how the life pass holders and other creditors voted on Tuesday. It's because the pre-packaged transactions were not ready to complete on Tuesday, and they are not ready to complete by Friday either. The deliberate campaign to blame the company's creditors for not going along with the plan at the Watershed Meeting is a smokescreen for the real issues with the proposed transactions. Recall that resolution B, which failed to pass, was not a resolution to 'do the pre-packaged transactions'. It was very carefully worded as simply a resolution 'to liquidate the company' and nothing else. The implication that the pre-packs would be completed immediately was only ever an implication.
Mood in the Room
There were a few small moments in the room on the day that seemed to significantly shift the mood of the creditors who were present:
The government sent a corporate lawyer who read a pre-prepared statement and refused to answer questions. MBIE and DOC, who are absolutely critical to how the post-liquidation process would have proceeded, did not send a representative.
One of the representatives of the new buyers when answering a question from the audience on a different topic, innocently stated that in their view "life pass holders don't bring much value". After which, there was an audible gasp from the audience. It may not have been on the mic, but an audience member from the back of the room shot back into the silence - "What about the Lifts?!"
Another representative of a new buyer read out a statement that "life pass model is not sustainable". They were innocently talking about their future business model, products and ski pass plans, but for an audience member with a family of four who was sitting in a meeting called to end the life of their $20,000 purchase (which they may have saved hard to make), it was a bitter pill to swallow.
Adding insult to injury, PwC announced with only a matter of minutes until voting opened, that all shareholders would be excluded from voting. Given life passes were originally issued with a share in the company, the unnecessary drama of announcing this rule at the last minute turned the mood in the room dark quickly as a large number of the most loyal supporters of the company (shareholders + life pass holders) are in their 60s and 70s (and older). The disrespect towards the older generation was felt keenly by their children and grandchildren in the room.
The net effect of the above is that the failure of resolution B to pass was not a proxy war or a pre-meditation. It was a result of a failure to make the case to the audience present to support the motion.
Proxies to bring parties to the table
The reason the Stakeholders Association provided three suggested proxies was that each individual proxy holder was able to vote their conscience and the information that they had available at the time from the transaction and their stakeholders. There was no pre-organised voting strategy or co-ordination of proxies. Instead, each proxy holder voted based on their own individual assessment of the information available (as did all other creditors). The Open Proxies were an important part of bringing the Minister, government and other parties to the table to negotiate in the week leading up to the Watershed. For example, both new buyers changed and improved their offers to life pass holders during the week before the watershed. The Stakeholders Association were also in active negotiations with the Minister and large creditors to try and gain support for the DOCA to de-risk the proposition (through equal government treatment of the community-ownership model). The Open Proxies helped open up those lines of communication.
Mood aside, there were very serious legal negotiations going on right up until 11am when the Watershed Meeting began. The Stakeholders Association had engaged legal counsel who were corresponding with the lawyers for the company and the lawyers for the government. The exact contents of those negotiations may be subject to legal privilege and/or confidentiality, so it's not appropriate to share them publicly. What we can share is what the Stakeholders Association were asking for from the government in return for support of the liquidation proposals:
Confirmation that Concessions had been transferred and that Iwi and local Hapu had agreed to those transfers.
Change the government shareholding in the New Companies from 25% to 25.1% so that the Crown could block a 'major transaction' under the Companies Act. Otherwise, the new companies could move at any time to sell all the assets to a third party with no recourse.
A life pass renewal offer that applied to both sides of the mountain. For example, on the terms proposed by MBIE themselves last year.
A modest element of community ownership, such as an undertaking to allow new investors into the New Companies through a listing on the Unlisted Market, Snowball Effect, etc. Such that the ski community, local community and local businesses could also become shareholders.
These criteria were in order of importance and the 'bottom lines' for support of the resolution were only the top two. One of the proxy holders commented recently:
"We did not want the concessions to break and the stalemate bought everyone involved a little bit of extra time for cooler heads to prevail and for the right thing to be done by the government. We also know from confidential documents and private discussions which we are privy to, that Iwi have been treated appallingly in this process (as have other parties). This will all come out in the future via the appropriate channels, but now is absolutely not the time."
There are several scenarios that could have played out from a YES vote on Liquidation:
Legal advice as at 11am on Tuesday was that the Pre-Packs would NOT have been completed because those agreements are (quite prudently) conditional on Concessions being in place.
One or other of the Pre-Pack buyers (no guarantee how either would have acted) might have waived their condition, completed the contract, and proceeded without a Concession.
Liquidation at the Watershed or liquidation in the High Court would still have left the same situation that we’re in now, where the operating concessions are the real issue for any new operator. There are several ways forwards for the concessions each with different consequences:
Operate without a concession. Several skifields in the South Island are operating temporarily without a concession (because theirs have expired), so it is physically possible to do so. However, this would reinforce the concern that a short term commercial solution could damage the long-term balance of public interest in skifield operations on Mt Ruapehu.
Concession transfers could be unilaterally granted by the Minister. This would risk setting Crown and Iwi relations (and local community sentiment towards the skifields) backwards because it would be directly prioritising commercial activity ahead of due-process and community consultation.
Iwi consultation could be accelerated and concessions granted in a matter of days. This time pressure might solve the short term problem, but could create larger long-term issues (described below).
The vote on Tuesday against Liquidation was not a protest vote (that was the vote for option A). The vote against option B was a vote of solidarity with the sentiment that the ski community are guests on the mountain and will not assert our 'right' to ski on Mt Ruapehu without due process. MBIE seem to have allowed the process to proceed in a way that minimised the opportunity for community and Iwi consultation.
Rushing the concession process now will make it harder for the renewals. For context, the last renewal took 3 years and required significant compromises by the skifield operators. There is already a very real risk of the skifields being asked to leave entirely. It's a published policy of some Iwi that they want no further ski infrastructure added to the mountain. Such sentiment is not an extreme opinion and the Department of Conservation also have their own environmental preservation policies that put doubt on the very ability to operate commercial activity in a national park. When the upcoming Treaty Claim on the mountain is settled, there is a very real question of whether commercial skiing will be a permitted activity at all. And the recent conduct of MBIE is not helping matters.
How did we get here?
The directors of the company in 2018 agreed to a framework in the Provincial Growth Fund Convertible Notes that bound the company to eventually move all the ski field assets to a NewCo. Thus ending the life of the community-owned business. This is a legal matter of director's duties and will be raised in the appropriate channels in due course. But that line of inquiry doesn't help get the lifts turning, so it's not of interest to the Stakeholders Association at this time.
There are several possible next steps:
A company can be traded by the liquidator for a period of time if it supports the best outcome for the creditors. This option may buy more time for a resolution, but would require urgent government support.
The company could be revived from liquidation if the creditors are supportive. This would require broad consensus and support from large creditors (again government support would be vital). This would restore the concessions and allow a transitional operation of the upcoming season while any future sales or restructuring proposals were socialised properly.
The pre-packaged sales might gain concession transfers and complete as planned in the next few days. If that was to occur, they would have broad support of the local community, ski community and wider mountain community. The lack of community ownership might be a residual concern, but issues of transparency, accountability and governance may well be able to be resolved over time with sufficient goodwill on all sides.
The new buyers may put a deadline on the Department of Conservation and/or Iwi. This deadline would be commercially very sensible, but the resulting time-pressure may put more tension on an already difficult situation. We hope it doesn't come to this.
Negotiations are ongoing and we'll update all stakeholders as soon as possible. You can also provide feedback on your preferred outcomes any time through our contact page. Community ownership may still be possible and we are working on options to support that outcome in a way that respects the process and provides certainty for the staff and local community.
Note: Several of the new buyers have mentioned the Stakeholders Association and/or Life Pass Holders in negative terms at points during this process. These comments have been disappointing to hear as the ski community has put considerable effort into reaching out to the new buyers to engage in positive dialogue throughout the insolvency. For the record, the new buyers seem well-intentioned, of high moral character and strongly committed to the skifields and local community. In a different timeline, I'm sure that we could have jumped in a room in October 2022 and resolved the whole thing as a community. The government divided us against each other. We can rebuild from that now, but it didn't have to be this way. We all need to do better. It's never too late to open a dialogue and come together.